Recent criticism of short sellers in both The Hill (“A New Breed of Investor”) and Roll Call (“Congress Should Launch Bipartisan Investigation of 'Short-Sale' Market,”) has diverted attention away from a serious consumer issue that disproportionately plagues Hispanic women. Organizations like mine work every day on behalf of victims who’ve fallen prey to misleading companies like Herbalife – which is currently under investigation by the Federal Trade Commission, the Securities & Exchange Commission, the Department of Justice, and Attorneys General in multiple states for deceptive recruitment practices and for operating as a pyramid scheme. Regardless of Bill Ackman’s business position, there is nothing “manipulative” about his claims.
Herbalife is selling an empty dream to hard-working, low-income Hispanic Americans and immigrants. The unfortunate reality is that the vast majority of Herbalife distributors – 89 percent – will make no money at all. It’s no secret that since these federal investigations first began, Herbalife has doubled their lobbying efforts to counteract the negative attention to their questionable business model, in addition to making prominent Latino hires and board of director appointments. If Herbalife claims to economically empower the Latino community, they should welcome the opportunity to set the record straight on basic questions surrounding their compensation structure rather than attempt to publicly silence critics of the company.
Short-sellers have historically played an important role in helping regulators focus attention on companies engaged in serious wrongdoing. Today, they take on a more prominent public role, leveraging research and insights to expose bad corporate actors. Having short sellers bring to light corporate fraud, malfeasance and inappropriate activity provides an underappreciated public good in that they help draw attention to issues when regulators either lack the time and/or the resources to do so. In this case, Bill Ackman is putting 100 percent of the money from his personal profits gained on this deal to support programs that benefit the Hispanic community, including underserved youth, not the least of which is a $10 million commitment to fund scholarships for undocumented DREAMers to pursue higher education. Ackman has shown his unwavering commitment to supporting the very community that Herbalife is knowingly targeting.
If there is any lesson to have been learned from scandals like Enron, Tyco and Lehman Brothers, it is that activists and advocates must speak up for those being disenfranchised and/or exploited. Is there a financial stake to be gained in all of this? Absolutely – but even if someone like Bill Ackman has a financial incentive to invest millions in researching and raising awareness about corporate wrongdoing that helps protect investors and consumers, it doesn’t change the fact that these claims need to be brought to light and to the attention of regulators like the FTC and SEC. For many in our community who’ve been victims of fraud and other abuses, this is welcome news.
As the president and CEO of a national Latina membership organization committed to efforts that support our communities’ financial health and economic advancement, I applaud the FTC and SEC for their efforts to date, and urge them to continue to take swift action and bring forth a prompt decision on the Herbalife matter. Ultimately, the regulators will decide if Ackman is right or wrong. In looking at the impact of Herbalife’s continued and pervasive targeting of the Hispanic community, I think there is only one decision they should make: Protect Latino and minority consumers and stop Herbalife from continuing their deceptive business practices.
Hinojosa is president and CEO of MANA, A National Latina Organization. MANA’s mission is to empower Latinas through leadership development, community service and advocacy.